The experiment has failed! For certain it has. And more damage will be recorded in the near future. The probability that the European Union will split back to its old self, at least in a year from now, is 100% certain! The signs where there from the start, when the Tony Mayor and Norman Lamont negotiated Britain's opting out of a single currency. Their reasons, in hindsight were realistic and very strong. Both had argued that, for a single currency to succeed, there had to be a federal system of taxation and spending applied in every country, in this case in member states of the EU. In the absence of such a system, the likelihood of a collapse is certain. That faux pas is here. Blundering nations left, right and center in the EU: Ireland, Portugal, Spain and the overlord Greece.
Former German Chancellor Helmut Kohl in the early 90's dominated crucial European submit meetings calling and following vigorously the move for the union, today we see another German fighting for its survival. Angela Merkel has been to the Bundestag twice already to beg for money to save the Euro, a third visit is close by. The latest dim idea is to allow the European Central Bank (ECB) lend up to 5 times the bail out fund of €440 Billion. This puts the total at over 2 Trillion Euros! Instead of going to the individual parliaments for increased contributions, EU leaders have resorted to using the ECB for another experiment.
The merry go round will continue, until nations in the EU revert to their original currencies and bar the freedom of movement in the zone. The call by the European Commission President Jose Manuel Barroso to Britain to help save Greece, even though Britain is not a member of the union, is another pointer to the naivety of the leaders of the EU. Another, clearly is the: silence from strong nations like The Netherlands, the refusal of the Slovakia parliament to pay its share of the rescue fund and the poison of the Greek debt spreading into the heart of the EU. The French- Belgian bank Dexia collapse is the latest. More banks will follow in the weeks to come.
The awful thing about this whole tragedy is that euro-zone finance ministers contrived this deceit that will eventually put all the capital investments and reserves of the ECB at risk. The freighting thing is that the ECB itself has a weak balance sheet at the moment. Who wouldn't, after standing behind defaulting euro-zone nations and their banks. The bonds (140 Billion Euros) purchased from Ireland, Portugal, Greece and others, helped to keep these nations afloat but will end up sinking the union itself. The strategy skunked from the first day and the world might end up suffering the backward ideas of these politicians. My view has always been that, the EU should have allowed Greece default (it was its own fault in the first place, joining the EU with forged figures) instead of rescuing it. This route would have hurt several French banks holding Greek bonds, true, but the problem would have been within the grasp of the union. It would have saved everyone this ordeal and maybe the so called experiment could have worked. At this rate, it wouldn't, not anymore!
